David and Goliath

Strategies for small companies to defend themselves against big pharma stepping into specialised and orphan drug markets

As big pharma desperately seeks to re-invent the way it does business, one interesting outcome has been the increasing attention paid to more specialist markets. This has even been in evidence in the smallest possible orphan and rare disease markets, such as rarer oncology, genetic disorders, immunology and infectious disease.

Earlier this year both GSK and Pfizer announced the formation of new standalone R&D units dedicated solely to the development and commercialisation of medicines for rare diseases.

Big pharma's interest in the sector is not just restricted to building R&D capability, however. Making acquisitions and forming partnerships are also rife: in March, Abbott Laboratories announced its acquisition of Facet Biotech, to access therapies for multiple sclerosis and multiple myeloma, while in December 2009 Pfizer signed a deal for the worldwide rights for Protalix's therapy for the ultra-orphan Gaucher's Disease.

But why the interest in these specialist markets? Despite the smaller overall cash opportunity, these markets offer big pharma a potentially highly lucrative environment in which to diversify corporate risk. Lower investment in clinical development, infrastructure and marketing expenditure means not only significantly greater profits, but also that companies can afford to invest in several of these brands simultaneously. This allows them to spread the corporate revenue risk away from one or two blockbusters and across different brands and markets.

For those of us already working hard in these more specialist markets, what are the implications of the encroachment from big pharma?

Big fish, little pondThere are two likely scenarios. The first, for the lucky ones, is the potential for partnership. This new big pharma strategy offers a major opportunity to bring in expertise, resource and capabilities that would not be available otherwise. This is what occurred in the case of GSK's 2009 alliances with Prosensa to fight Duchenne Muscular Dystrophy and with Genmab for Arzerra (ofatumumab) in the area of refractory follicular non-Hodgkin's lymphoma.

However, in the majority of cases, a second scenario is more likely: that the advent of big pharma in the marketplace will represent a new, highly-skilled and well-resourced competitor for smaller companies.

Rather than focusing on the first scenario of developing partnerships and alliances, I am going to look at what we need to consider when, as David, we face the big pharma Goliath. To continue to be successful you will need to understand how the opportunities change, what new challenges arise and what you need to do in order to remain competitive.

You might not thank me for reminding you that it is very likely that your new big pharma competitor's substantial resources will extend not just to cash, but also to organisational skills and expertise.

It will be unlikely that smaller companies will be able to match big pharma in terms of resources, it will be essential to work smarter to ensure success. You need to be confident that you're doing the right things and that, crucially, you are doing those things well.

There are three crucial points to consider. Firstly, we must ensure that we will not be caught out by any changes resulting from a new competitor entering the market. Then, in the changed environment, we need to understand what, as a marketer, we can do better to ensure we're still accessing those customers that drive our business. Finally, given our limited resources, we must ask what we can do to make sure we're getting the most from our spend by doing the right things and doing them right.

The changing marketThe first thing we need to ensure is that we are not caught out by any changes resulting from a new competitor entering the market.

Unquestionably, on entry of a new competitor, the competitive dynamics of the market will change. In light of this understanding, how can we guarantee that we are well prepared?

Essentially, we must evaluate the market's reaction to this new competitor; specifically the implications for how our customers' attitudes might be affected. What strategies and tactics will our new competitor use to win, and use against us? Only once we are confident of what is likely to happen in our market can we test how well our strategy will perform, identify our internal competitive priorities and then, where necessary, adjust these strategies to be future proof.

Many organisations have good competitive intelligence in the forms of facts, figures and historical analysis. However, in this situation, looking at history and current performance doesn't help. Instead, we need to predict the future as best we can. One way to do that is through 'war gaming'.

War gaming is the name given to a role-playing workshop, during which participants play the role of their competitors. Stepping into the other side's shoes allows participants to develop an informed prediction of the competitors' most likely strategy, as well as prepare for the market's likely reaction. The team also gains valuable insight into the workings, thinking and priorities of its most important competitors. Armed with this insight, war gamers are able to pressure test their current intentions, which can then guide any changes the team might need to make.

Customer retentionAs a marketer, what can we do better to ensure that, in this changed world, we're still activating those customers that drive our business?

One answer to this question is to optimise segmentation, positioning and tailored messaging, through which smaller companies can gain a competitive advantage even if they are less well resourced.

However, segmentation and positioning tend to rely on generic market research, which doesn't have the required level of insight, meaning that the result is frequently of poor quality.

Creating better positioning requires a real insight into customers' attitudes, beliefs and motivations, as well as a deep understanding of real customer language. To achieve this demands implementing one of our most useful (and often underrated) marketing tools – truly insightful customer research.

To ensure that market research is delivering the required level of insight, there are several key steps:

Define clearly the critical business issue you need to address and formulate a hypothetical answer. You can then confirm or reject market truths and identify any knowledge gaps against your initial hypothesis

Ensure research objectives are clear, appropriate and focused. Challenge and agree the methodology to avoid any unclear results

During fieldwork, ensure you keep focused on the key research questions and, as often as possible, attend qualitative research in person

Make sure that when you assess the research diagnosis, the team has the capability and resource to meet the challenges identified.

Using limited resourcesGiven our limited resources, what can we do to make sure we're getting the most from our spend by doing the right things and doing them right?

Ensuring the budget is working hard and producing the maximum possible impact can be done in two steps: establishing clarity about the barriers to growth and the commercial challenges that are of the highest priority, and creating and maintaining a transparent and realistic view on return on investment (RoI).

Usually RoI analysis fails because it is being used on marketing plans that have been created in a rush and in which the activities and outcomes are not clearly linked to the opportunities in the market.

However, it is possible to analyse RoI successfully by using the two steps described above. Through the planning process it should be possible to build a detailed picture of the barriers to growth. Once this has been achieved, you will be able to identify your commercial challenges and which levers are able to drive change. This then allows you to focus on RoI.

Executing plan implementation to optimise RoI requires a detailed understanding of where revenue can be generated and is currently lost. This can be done easily by using a tool such as the Patient Flow, which maps the total market opportunity to actual brand value, enabling us to identify where we can drive business growth efficiently and helping us to uncover the behaviour changes needed to drive increased sales.

Once the necessary behavioural changes have been identified, the next step is to define which tactical objectives and priority marketing and sales activities will be needed. Using a measurable scale of tactical objectives (such as the SMART objectives) will create a connection between the activities where investment is being made, the cost allocated to these activities, the priority behaviour change and the commercial uplift.

Next stepsAs noted above, given the increasing infiltration of big pharma into specialist markets, if smaller companies are not in a position to use their resources and skills in partnership, it is essential that they have a well prepared defence in place to enable them to survive instead.

Critically, smaller companies must ensure they are well prepared for the most likely eventualities in the marketplace, and that their strategies reflect this. This will help the companies avoid the nasty surprise of being caught out by any changes in the market.

Ensure that segmentation and positioning is based on meaningful market research insights. This will then activate those customers that drive the business, allowing companies to gain the greatest competitive advantage possible through their communications.

Finally, companies much check that their spending is working as hard as it can by linking investment in activities directly to major sales drivers and opportunities.

These tips for success will prepare any small company for the increasing changes to the competitive landscape in the specialised and orphan drug market.

The AuthorMichael Craig is a senior commercial strategy consultant at the MSI Consultancy